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California payday lender refunds $800,000 to settle predatory lending allegations

By JIM PUZZANGHERA
JAN 22, 2019 | 4:00 PM
| WASHINGTON

A California payday lender is refunding about $800,000 to consumers to settle allegations that it steered borrowers into high-interest loans and engaged in other illegal practices, state officials said Tuesday.

California Check Cashing Stores also agreed to pay $105,000 in penalties and other costs in a consent order with the state’s Department of Business Oversight, which has been cracking down on payday and other high-cost consumer loans that critics allege are predatory. The company did not admit guilt in the consent order.

The department, which oversees financial service providers and products, has taken similar actions against four other companies since late 2017 as part of an effort to enforce the state’s limits on interest rates for payday and other small-dollar loans.

In Tuesday’s action, the settlement involves alleged violations regarding administration of payday loans, which are capped at $300, and the steering of borrowers into consumer loans of more than $2,500 to avoid rate caps.

California law limits interest on loans of up to $2,499 at between 20% and 30%, but there is no cap for loans of $2,500 and larger.

“Steering consumers into higher-cost loans to circumvent statutory interest rate caps is abusive,” said Jan Lynn Owen, commissioner of the Department of Business Oversight.

“Consumers deserve protection and access to lending markets that are fair, transparent and comply with the law,” she said.

The action comes as the newly installed chief of the Consumer Financial Protection Bureau is reportedly planning on loosening new federal rules on payday lending that were proposed during the Obama era but have not yet gone into effect.

The proposed federal rules would provide a floor of basic protections for borrowers nationwide, but states would be free to make them tougher, including enacting interest rate caps, which the federal consumer bureau is prohibited from doing.

Richard Cordray, the former head of the bureau who proposed the rules in 2017, said the move by California regulators is another example of why the industry needs to be closely regulated.

“The enforcement actions they’re bringing show that some people are really ignoring what the requirements are supposed to be,” said Cordray, appointed by then-President Obama as the bureau’s first director.

California Check Cashing Stores has about 118 locations statewide and is owned by privately held Community Choice Financial Inc. of Ohio.

“We disagreed with the findings of this but we agreed to the settlement so we can move beyond this and get back to serving our customers in California,” said Patrick Crowley, a spokesman for Community Choice Financial.

In addition to check-cashing services, the California stores offer payday loans, auto title loans and prepaid debit cards, with the company touting on its website that it can help people “Get Cash Fast, In-Store or Online.”

State examiners said they found that, from 2012 to 2017, California Check Cashing Stores overcharged customers interest and fees by steering them into loans of $2,500 or more to avoid the interest rate caps.

The settlement also resolves allegations that the company made “false and misleading statements in its advertising” by saying in brochures that it made loans of “up to $5,000” but had a minimum of “$2,501.”

The consent order requires California Check Cashing Stores to refund about $100,000 related to 1,200 consumer loans.

Most of the refunds — about $700,000 — go to borrowers involved in 3,000 payday loans.

Those loans typically are cash advances on a worker's paycheck for two to four weeks and carry a flat fee or an interest rate that doesn't seem particularly high — $45 for the maximum $300 loan. But the cost can quickly add up if the loan isn't paid off, and the effective annual interest rate can reach 300% or more.

The settlement resolves allegations that California Check Cashing Stores collected charges twice, allowed borrowers to take out a new loan before paying off the old one and deposited some customers’ checks before the date specified in the loan agreement without their written authorization. Typically payday loans are paid back on the date the borrower receives another paycheck.

The consent order requires the company to audit its files for loans that are due refunds and submit a report to the state within 30 days and send out the refunds within 90 days. Current customers will receive a credit in the refund amount; those with a balance less than the refund amount or who paid off the loan will receive a check.

State officials said customers should contact the company if they believe they are due a refund.

The state agency has reached settlements since late 2017 with four other companies — Advance America, Check Into Cash, Quick Cash Funding and Speedy Cash — over various practices the agency said were aimed at improperly pushing loans above the $2,500 threshold.

The state has moved aggressively to rein in payday lenders as efforts to more closely regulate the industry have stalled following the election of President Trump. The president has sought to extend his deregulatory agenda to the CFPB since Cordray stepped down in late 2017 to pursue what turned out to be an unsuccessful bid for governor of Ohio.

The new federal rules developed under Cordray require payday lenders to determine upfront the ability of potential borrowers to repay payday and other short-term loans of 45 days or less.

Current White House Chief of Staff Mick Mulvaney, who replaced Cordray on an interim basis, got a federal judge in November to postpone the August 2019 effective date for most of the rules because of potential changes he wanted to make.

Last month, Kathy Kraninger, Mulvaney’s former White House aide, took over as permanent director of the bureau after being confirmed by the Senate.

The American Banker news site reported last week that Kraninger was expected to remove the ability-to-repay provisions, a move that would certainly draw opposition from the new House Democratic majority.

A CFPB spokesman did not respond to a request for comment.

Cordray said that would be a mistake to get rid of the new underwriting requirements and predicted such a move also would be challenged in court.

“We thought that people should not be put into a loan in the first place unless the lender could provide a reasonable assessment that they could repay it,” he said. “I thought those rules were important. They are not the be-all, end-all because states can do more.”

California legislators last year considered but failed to approve several measures, including bills that would have capped interest rates on larger loans, limited the number of payday loans a single borrower could take out at once and required lead generators to be licensed as loan brokers.

Why am I caring about this? because of THIS...

Pawnshops and payday lenders surge on US government shutdown
Specialist consumer-financiers help bridge earnings gap for federal workers

Nicole Bullock in New York JANUARY 20, 2019

Pawnshop chains and payday lenders, some of the most contentious companies on Wall Street, have experienced a big lift during the longest government shutdown in US history.

Gridlock in Washington over President Donald Trump’s plans to build a wall on the border with Mexico has deprived hundreds of thousands of government employees and contractors of their wages. As a result, some have turned to specialist consumer-finance companies to bridge gaps between earnings and outgoings.

Shares in World Acceptance, a South Carolina-based short-term lender, are up 22 per cent since the shutdown took effect about a month ago. EZ Corp, a pawnshop operator based in Austin, Texas, is 20 per cent higher over that period. In both cases, the rises are much more than benchmarks, suggesting investors could be betting on a surge in demand to cover unexpected expenses. 

“Many people . . . are reaching into savings and looking for short-term liquidity if they need to pay the mortgage or something else,” said Michael Underhill, chief investment officer at Capital Innovations, an investment firm in Milwaukee. “Alternative lending platforms have likely stepped into the void.”

The small-dollar lending industry has been a focus for Democratic politicians in recent years, as regulators have introduced lighter-touch regimes for agencies such as the Consumer Financial Protection Bureau, which had punished a succession of consumer-loans companies under the previous administration. Critics claim that short-term lending can be predatory, trapping borrowers in cycles of debt. 

[‘Debt traps’ can lead to] a cascade of financial consequences that include bank penalty fees, delinquency on other bills, and even bankruptcy

Scott Astrada, Center for Responsible Lending
About 78 per cent of US workers live pay cheque to pay cheque, according to a 2017 study by CareerBuilder, a jobs portal. A survey the same year by the Federal Reserve found that nearly half of American families could not cover a $400 emergency expense without borrowing or selling something to do so.

Banks have offered help to government employees working without pay, saying they will allow customers to skip mortgage or car-loan payments, while waiving certain fees. But they are unlikely to be able to provide short-term, unsecured loans: many pulled out of such lending in the aftermath of the financial crisis, blaming regulatory risks and higher capital requirements.

Chad Prashad, chief executive of World Acceptance, said his company was seeing demand in Texas and the south-east of the US where there were big airports employing government workers.

In response to the shutdown, World Acceptance, which specialises in ‘instalment loans’ of up to three years, is offering cash-strapped government employees deferrals on their loans without interest or fee penalties. New customers can get up to $1,250 in a 10-month loan with 0 per cent interest and no fees. [Deceptive predatory practices]

“Because we lend in our communities, face to face, we see the concerns first hand and have decided to help directly,” Mr Prashad said, adding that the company ran similar programmes after natural disasters such as hurricanes and tornadoes.

Shares in Lending Tree, a consumer-loans portal, are up 42 per cent since the shutdown took effect, almost four times the gains of the mid-cap market over that period. “The government shutdown is likely creating demand on Lending Tree’s platform,” said Shweta Khajuria, analyst at RBC Capital Markets.

Tendayi Kapfidze, chief economist at Lending Tree, said the share price rally was not “completely related” to the shutdown. He said the rise was mostly caused by higher mortgage applications since a fall in interest rates since the end of November. 

Scott Astrada, director of federal advocacy at the Washington-based Center for Responsible Lending, said borrowers needed to be wary of products that were “debt traps by design”. They can lead to “a cascade of financial consequences that include bank penalty fees, delinquency on other bills, and even bankruptcy,” he said.

The quality of CGI is getting scary.

Yes, you are whitewashing Trump's lies.

Nice attempt at bobbing and weaving \. Youjr cites about alleged fake data on climate change were notbly absent with anything othe4 than undocumented rant. If you had read several posts on in your cite, you would have found that the study you cite's authors actually agree that climate change is going on. Richard Lindzen is an outlier. He makes a whole lot of charges unrelated to the science but rather his unverified views of the politics of it, which he has helped stoke. And as mentioned, his hypothesis hzs been shown to not be true.

Evidence continues to accumulate. Prove to me NASA/NOAA are getting it wrong. Prove the satellite dat set are wrong, the temperature data, the gravitometric data. Prove the USDA are wrong. Prove ocean temps and acidification A=are wrong. There's a whole lot of data and your case is basically just unverified rant. As usual.

https://thehill.com/opinion/white-house/428755-mueller-hauled-before-secret-fisa-court-to-address-fbi-abuses-in-2002

Painting Socialists as Villains, Trump Refreshes a Blueprint


nyt

It may not be nice to point this out but USAmericans hate taxes, don't trust government, and have an epigenetic fear of the "red menace". It wouldn't be difficult for Trump to get his storm troopers ramped up about this and Dem candidates won't be able to get a word in edgewise.

Maybe Dems can make a case that taxpayer-supported socialism can and does work — for the military-industrial complex. Corporations are getting rich and workers are making big bucks making weapons to sell to corrupt foreign governments and use against people who don't look like us. Every year we shovel tax dollars into overpriced systems of dubious necessity to keep those factories humming. Every year tax dollars are spread into communities which are economically dependent on some obsolete military base which can't possibly be closed because, well, the economy. This socialist benevolence is also seen in the prison-industrial complex where vast rural areas are dependent on government prisons to provide jobs and prop up local businesses. It's great when the contributions of people around the country can help to support wasteful enterprises, inflict punishment, and help individuals and communities at the same time!

Socialism IS villainous. How many stories about how well that **** worked in the CCCP would you like to hear??

I've heard them all. But I don't live in the USSR, I live in the USA. It's a very different country and this is a very different time.

I disagree. By dismantling current legislation, he is hurting an already financially fragile people. By you condoning his actions, you betray your fellow citizens.

Every other developed country in the world has some form of what you guys keep calling socialized medicine, i.e. socialism. They have long histories, in at least one case going back to the 19th century. They all have better health outcomes, better doctor to patient ratios, higher ptient satisfaction, A;ND COST A FRCTION OF WHAT WE PAY. Trump himself has several times praised single-payeer systems as superior to ours. Yet he keeps trying to kill America's baby step in that direction, Obamacare. As usual, snkkkE, you're wacked. Decades of actual real=world multinational experience proves that.

Our health insurance system was established in 1883 (Bismarck's Health Insurance Bill) but goes back to the statutes of our medieval craft guilds.

You have made very broad assertions, several of which I believe are untrue, particularly with respect to comparative health outcomes, particularly for serious diseases, and the timely access to specialists and advanced care that often requires. Can you provide some data to back up these claims?

I've done so several times. /the US system has not come off well.

Bullshit. You spout rhetoric and source 0.

Or to busy to watch girls groomed and raped by Pakistanis while authorities did nothing. Then, not to busy to defend the intolerant culture of Islam, which you do regularly.

If you will check on post diagnosis survival rates for diseases like cancer and others you will find they are significantly greater in the USA than in Canada.

Since I know a couple of persons with meloma of the skin, I do now meanwhile some facts about it ... from a more rural point of view.

It takes about 4 to ten days from being diagnosed until you'll get the first date in the specialised hospital. From that day, between three to ten days until the operation.
After care is done in specialised clinics in spas, the locally in the practise of an oncologist and your family doctor. The two friends, who were operated last year/two years ago, both get Nivolumab (marketed as Opdivo in the USA, I think), costs for it are 10€ for the patients and 4740.10 Euro for the insurer.
All statuary ("socialised") healthcare. It may differ, if you are insured with a private health insurer - every two weeks for at least one year.

The death rat for males is 3.7% and for females 1.5%. In the USA (2012-2016) (Source)

In Germany the death rate is 2.9% for males and for females 1.7% (in 2014) (Source)

If he checks he will find out how many Canadians cross the border to get medical treatment here. There is no waiting here for medical treatment the patient wants, not what the government approves.

If you want the government to make those decisions for you I suggest he moves north.

Human nature has not changed since 1919.